Last autumn, I published a number of blog entries to help explain how the old system worked. Through this entry, which focusses on the period up to 5 April 2016, I want to show how people may have paid different amounts of NI over their working life through to the end of the tax year 2015/16, and how this has contributed to the State Pension they are or will become entitled to.
In previous blogs I have outlined the changes to the State Pension from 6 April 2016. There are a couple of ways you can check how these changes will affect your own position.
To determine your new State Pension, a ‘Starting Amount’ calculation is made. This will form the base on which, in most cases, you may be able to add to your State Pension under the new system.
So far, I’ve just explained how your State Pension builds up at the moment, based on NI you are paying or credited with this year. But your eventual State Pension will depend on your past NI record, as well as what you are building right now.
Being “contracted-out” generally means that you are paying lower National Insurance rates than the standard full rate for employees. You will be paying lower National Insurance as you are opted out of State Second Pension (S2P).
I want to try to help you understand how the State Pension works – both under today’s rules and in the future.
I will start by explaining the current State Pension.
This blog will just focus on how NI payments help you build up your State Pension. I hope it will give you a better idea of how the system works.